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Export Sales data had decidedly mixed effects on crop futures

Corn traders were apparently ambivalent Thursday night about the likely outcome of the weekly Export Sales reports released this morning. The actual data seemingly favored bears to some extent, since the actual sales total, at 189,700 tonnes fell short of industry forecasts in the 200,000-450,000 tonne range. On the other hand, bears could sustain only a portion of the downward pressure that arose in the immediate wake of the news. CBOT futures were mixed around unchanged levels in late-morning trading. We suspect bulls were joined by technicians thinking support around the 40-day moving average (MA) for the nearby March future would hold. That may bode well for the market as the week draws to a close, although we would warn that changing South American weather forecasts could send prices in either direction Sunday night. March corn had edged 3/4 cent lower, to $7.23 1/2 in late-morning activity, while December had fallen 1 cent to $5.84 1/2 per bushel.

The Friday morning Export Sales report proved supportive of soybean futures, since the USDA result, at 978,200 tonnes, topped predictions ranging from 750,000 to 950,000 tonnes. This certainly seems to suggest underlying demand for U.S. producer remains strong despite the looming onset of the South American harvest and the likely bearish effect that could have on spot values around the globe. Some traders may also be buying in response to the fact that the European weather forecasting model has not confirmed the Argentine rainfall implied for next week by the American model. Thus, futures could react rather dramatically to potential changes to the South American forecasts coming out over the weekend. March beans rose 7 cents to $14.42 1/4 per bushel in Friday morning trading, while March soyoil had inched 0.01 cent higher to 52.12 cents/pound and March meal advanced $2.7 to $417.4/ton.

Wheat futures posted a surprisingly weak reaction to the weekly Export Sales data released Friday morning, but gathered bullish momentum as noon approached. Industry forecasts ranged between 350,000 and 550,000 tonnes, so the stated USDA figure, at 647,500 tonnes, seemed quite supportive. Some aggressive traders may have been anticipating a larger result, which might explain the quick post-report drop, but the subsequent rally certainly suggests most were pleased with it. The ongoing lack of rainfall predicted for the Southern Plains may also have boosted the market. Finally, technicians may have been buying after bears proved unable to penetrate surprisingly robust support associated with the 20-day MA for the benchmark March CBOT future. It had surged 11 3/4 cents to $7.80 1/4 just before the lunch hour, while March KCBT wheat jumped 13 cents to $8.34 1/2 and March MGE futures spiked 14 3/4 cents to $8.70 1/4.

Thursday afternoon news of rebounding cash prices seemed to provide a major shot of confidence for cattle market bulls, since prices have rebounded substantially from mid-week lows as a consequence. We suspect the apparent repudiation of a technical formation suggesting a major follow-through move to the downside also sparked fresh CME buying. On the other hand, the looming afternoon release of the monthly Cattle on Feed report holds the potential to shift sentiment once again, especially if December feedlot placements exceed the modest annual increase implied by wire service surveys. February cattle had gained 0.82 cents to 126.70 cents/pound around midsession Friday, while April was up 0.70 cents to 131.05.

Ongoing events seem to be supporting bullish hopes for the short-term hog outlook. For example, wire service reports suggested Friday morning that pork packers are short-bought in meeting their needs for next week, while slipping hog weights are reducing pork production per head and implying diminishing supplies available during the days ahead. Moreover, the CME lean hog index continues marching upward; it is expected to reach 88.28 cents/pound when the official exchange quote is released Monday morning. Thus, nearby futures seem somewhat underpriced. Given these conditions, the Friday morning slippage in Chicago prices was rather surprising. Bullish traders may be having second thoughts about their positions as a consequence. February hogs had slipped 0.27 cents to 86.77 cents/pound just before the lunch hour, while June futures had fallen 0.35 cents to 97.25.